Cars and Drivers

What Analysts Are Saying About GM Ahead of Earnings

Chris Lange

Published: July 20, 2016 12:55 pm

Last Updated: January 13, 2020 5:30 am

General Motors Co. (NYSE: GM) is scheduled to report its second-quarter financial results before the markets open on Thursday. Although 2016 has been a rough year for one of the largest auto manufacturers in the United States, in a report issued ahead of earnings some analysts see a huge upside.

The Thomson Reuters consensus estimates are calling for $1.51 in earnings per share (EPS) on $38.93 billion in revenue. In the same period of last year, GM said it had EPS of $1.29 and $38.18 billion in revenue.

Just recently, Merrill Lynch issued a Buy rating on GM shares with a $42 price objective. That implies upside of over 36% from Monday’s closing price of $30.77, and then there is the high dividend yield to consider.

For GM, it’s really not all just about sales growth. Merrill Lynch’s John Murphy and his team think that GM’s second-quarter earnings may prove the skeptics wrong. They expect that GM should benefit from solid production growth and the positive sales mix and pricing. GM’s go-to-market strategy in North America is also considered a positive.

Murphy detailed in the report:

We expect GM’s FY16 earnings may be back-end loaded given CUV launches and a potential production ramp to replenish inventory … we also expect GM’s results will benefit from strong North American margins as a result of positive mix/price and the company’s go-to-market strategy in the region, as well as some stabilization in China volumes/pricing. We forecast continued losses in Europe and Latin America, which could prove conservative, but appear reasonable for now.

A few other analysts weighed in on GM ahead of the earnings report:

• Barclays reiterated an Equal Weight rating with a $36 price target.
• Goldman Sachs has a Neutral rating with a $36 price target.
• Royal Bank of Canada reiterated a Sector Perform rating with a $41 price target.
• Citigroup reiterated a Buy rating with a $50 price target.
• Piper Jaffray initiated coverage with an Overweight rating with a $41 price target.

So far in 2016, GM has underperformed the broad markets, with the stock down about 5%. However, over the past 52 weeks the stock is more in line with the broad markets.

Shares of GM traded up 0.8% at $31.51 on Wednesday, with a consensus analyst price target of $36.75 and a 52-week trading range of $24.62 to $36.88.